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Why does the market move towards the heavier side of the order book?
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Why does the market move towards the heavier side of the order book?

  #11 (permalink)
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josh View Post
... why is it the case the the side with more orders tends to draw price to it?

Assume you are a big trader / trading desk that has deep pockets and needs to use any possible way to produce positive results.

In this situation you can be confident that it will be possible for you to move the market a few ticks in the direction you choose.
It won't be a problem if the market moves a few ticks in a direction that you don't really want.

So you can produce income for example by letting the market move some ticks down by hitting bids in sequence only to have some people with small pockets enter short.
When the market went far enough down you can start to induce (with big pockets) an upmove.
The further this move advances (up) the more stop losses of the small pockets will be hit which will speed up the upmove even more and drive your overall position further into profit.

To make this strategy work you always go for the side where more orders are showing because you need size to make bigger profits.

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  #12 (permalink)
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accumulation and distribution

An Order Book lists numerous open orders that only exist for seconds before being pulled. It is the old orders that are not pulled and some distance away from the price that signals where accumulation and distribution will occur. Fulcrum Trader among retail traders probably does this very well as do many others.

My 1 cent.


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  #13 (permalink)
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A bid is just a bid. A bid is not demand. An offer is just an offer, an offer is not supply.

A bid might be demand. A bid might have been demand but got pulled because of aggressive selling. A bid might be totally fake to lure people to buy. Hence a bid cannot be seen as demand, just a bid. It is it's own thing.

A bidder is a guy waving his hand at an auction saying he wants to buy something but who is just as likely to put his hand down when price gets close to him.

Most of the time, when you move through a level, you will move through the level because the remaining bids/offers get pulled. This is because bids/offers are not real supply and demand.

So, just think of them as their own entity, they are bids and offers. There are reasons people are putting in those bids and offers and it is often because they want to do the opposite to what they show on the order book. Of course, one reason someone puts in a bid or offer could be because they actually want to buy or sell but this is just one reason of many.

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  #14 (permalink)
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Thanks DT, this is a great explanation, good stuff.

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basically order clusters are like magnets for price


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  #16 (permalink)
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Large volume means a large number of open positions. Someone sold a lot, someone bought it. If the BID was a large limit order, it was filled, you will see a large volume on lowering prices. The opposite of sales.
Abnormally large volumes, of which here and there is a debate, or volumes, sharply against the other, are showing interest from large traders to the price. And they usually buy at the BID and sell on the ASК. Usually,)))
Also includes a large number of sellers or buyers with a market order, exposing their rear. Those who sell at the bottom, filling the large trader, will be the stop loss buyers. Large volume - thick wall.

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  #17 (permalink)
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bloom View Post
Large volume means a large number of open positions.
Large volume - thick wall.

Are you talking about orders in the order book, or transactions which have taken place?

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  #18 (permalink)
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Haverchuck View Post
There was a lengthy discussion on this a few years back on ET started by a guy named Viper Speed Trader. He developed a strategy based on the cumulative volume of the first 5 levels of the orderbook on both sides (he referred to it as ACV). When he saw that one side of the orderbook was twice as large as the other, he would scalp toward the direction of the size. You might want to check out his thread for more details/examples (search for "VSTscalper" on ET).

Someone else created a indicator for him to plot the ratio of the cumulative bids vs. cumulative asks. You can see in this example that when price is moving down, the indicator (3rd panel) does in fact show that the cumulative bid volume (1st 5 levels) is twice as big as the cumulative ask volume (e.g., the reds bars are hitting "-2").

After reading the ET thread a few years ago, I tried out the indicator for a few weeks, but ended up ditching it.

Not sure if this info helps your question, but just passing it along since I thought it was an interesting topic when I first came across it.

Looks interesting. I'm curious if anyone has the OrderBookOscillator for NT7? I downloaded the old one off ET, but it does not work on NT7.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #19 (permalink)
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Anagami View Post
Looks interesting. I'm curious if anyone has the OrderBookOscillator for NT7? I downloaded the old one off ET, but it does not work on NT7.

@Anagami fix order book indi

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  #20 (permalink)
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cory View Post
@Anagami fix order book indi

Cory, thank you for the indicator.

Is it possible to draw a dotted line at the present value of the oscillator?
Realtime is hard to see the current value of the indicator.


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